Text Size:
A|
A|
A
Email
PrintHARRISBURG -- Gov. Ed Rendell today proposed a general fund budget of just over $29 billion for the fiscal year that starts July 1, an increase of more than 4 percent over the current year's $27.8 billion spending package.
He isn't calling for increases in the state income tax rate, but he is calling for dramatic changes in the state's 6 percent sales tax -- starting in September, if the Legislature agrees. He said the changes are needed so the state can compensate for looming budget deficits in 2011 and 2012.
PDFHe wants to lower the sales tax to 4 percent statewide (with an additional 1 percent for Allegheny County and an extra 2 percent in Philadelphia), but remove a whopping 74 current exemptions "to make for a fairer tax system."
Exemptions to be removed include professional services such as attorneys, architects and accountants and the sales of caskets, flags, magazines, direct mail and catalogs, dry cleaning, personal hygiene products, school buses, trout, fish feed, wrapping/package supplies, coal, rail transport equipment, firewood, candy/gum, airline catering, investment coins and metal bullion and helicopters.
Remaining exempt from the sales tax would be sales of food, clothing, prescription drugs, manufacturer processing, agriculture machinery and nonprofit cultural activities.
Mr. Rendell, who leaves office in January, said such changes are needed so the state can cope with looming deficits of $2.4 billion in fiscal 2011-12, which starts July 1, 2011, and an even larger deficit of $5.6 billion that could hit by July 2012.
The state will lose nearly $2.8 billion in federal stimulus funds after this upcoming budget. So Mr. Rendell wants to create something called the Stimulus Transition Reserve Fund, which would include funding from a number of sources and, after two years, contain $2.3 billion to cushion the blow of lost federal funds and higher pension costs.
The new fund would include in the first year (starting this September):
• $531 million from removing 74 current exemptions to the sales tax but lowering the rate to 4 percent.
• $161 million from a new tax on natural gas pumped from Marcellus shale regions in the state.
• $42 million from extending the sales tax to cigars and smokeless tobacco.
• $67 million from "cutting business taxes and closing business tax loopholes."
• $74 million from eliminating a discount that vendors now get for sending in sales-tax payments on time.
"None of the revenues raised from these new sources would be used in the 2010-11 budget," Mr. Rendell said. "Instead, 100 percent of these funds would be set aside in the (stimulus reserve) fund that, by law, could not be tapped until July 1, 2011." He noted that is "nearly six months after the end of my term."
The Rendell budget for fiscal 2010-11, which now goes to the state Legislature, consists of $26.27 billion in state funds, bolstered by $2.76 billion in federal stimulus funds. That compares to $25.2 billion in state funds in the current, 2009-10 budget, along with $2.6 billion from the feds.
As usual, the biggest chunk of the proposed spending in 2010-11 would go for education -- $12.3 billion, or 42 percent of the total.
School costs, including higher education, is one of six parts of the budget that will be larger in fiscal 2010-11 than in the current year. The others are public welfare, aging/long-term living, prisons, probation/parole and debt service, meaning interest on previous borrowing. All other sections of the budget have been reduced by about 1 percent, the governor said.
Mr. Rendell has said the state can't really control spending in most of those areas, especially prisons, welfare and aging. In his years as governor, he has made it a point to increase spending on education, areas such as kindergarten through grade 12, pre-kindergarten classes, all-day kindergarten and tutoring, saying it's important to give children and youths a good start with education to make them more productive adults.
The Legislature already has started hearings on the new budget, but it hasn't adopted a complete budget by the July 1 deadline in any of Mr. Rendell's seven years as governor.
Other budget points:
• Mr. Rendell didn't propose increasing the personal income tax, as some legislators had feared he might.
• The number of state jobs will be lowered, bringing to nearly 4,900 the number of positions eliminated since Mr. Rendell took office in January 2003. The state now has about 77,000 workers.
Looking for more from the Post-Gazette? Join PG+, our members-only web site. You'll get exclusive sports content, opinion, financial information, discounts from retailers and restaurants, and more. Our introduction to PG+ gives you all the details.
